CEO pledges more cost-cutting efforts to continue turnaround.
In its recent first quarter holdings report, Sears Holdings Corporation demonstrated that its cost-cutting measures are starting to have an impact: the company saw its first profits in nearly two years: Q1 net income was $244 million, or earnings of $2.28 per diluted share, up from its net loss in the year-ago quarter of $471 million, or $4.41 per diluted share. The adjusted net loss in the quarter was $230 million or $2.15 per diluted share, compared to the FactSet analyst forecast cited by MarketWatch for a net loss of 71 cents per share.
But even as profits rose slightly, the retailer saw continued diminishing sales, with Q1 revenues plummeting 20.3 percent to $4.3 billion, from $5.4 billion one year ago. The decline was largely the result of store closings, which accounted for $557 million of the decline. That beat the FactSet forecast cited by MarketWatch for revenue of $4.1 billion. Q1 same-store sales fell 11.9 percent, and that accounted for $417 million of the revenue decline, according to a company press release.
Rob Riecker, Holdings' Chief Financial Officer, said, "During the first quarter we took decisive actions to reduce our cost base and drive operational efficiencies which allowed us to make significant progress on our restructuring program. We also remained focused on increasing our financial flexibility and creating value from our asset base to ensure we continue to meet our financial obligations and fund our transformation. We will continue to evaluate our options to deliver further improvements to our operational performance and balance sheet."
Looking forward, CEO Edward Lampert asserted that the company will commit another $1.25 billion toward cost-cutting efforts. "While this was certainly a challenging quarter for our company, it was also one that clearly demonstrated our commitment to return Sears Holdings to solid financial footing,” he said in a statement. “We recognize that we need to accelerate our efforts to improve our operational performance and are moving decisively with our $1.25 billion restructuring program.”
The company also plans to investigate ways to unlock value “across a range of assets,” including its Home Services and Sears Auto Centers businesses and its Kenmore and DieHard brands, “through partnerships or other means of externalization that could expand distribution of our brands and service offerings to realize significant growth,” according to a press release.